Mills reports third quarter declines

Rental revenues dropped 7.9% to R$68.7 million in the third quarter for Mills Estruturas e Serviços de Engenharia, compared to the same period in its previous financial year.

A drop in price resulted in lower demand overall, said the Brazil-based rental company. Rental revenues in the Construction business unit were affected by a R$1.1 million decrease in rented volumes, although in the Rental business unit, there was a positive effect in volume of R$2.6 million.

Net revenue for the group reached R$ 36.5 million in the third quarter, a drop of 7.7% quarter-on-quarter and of 28.7% year-over-year.

It followed a restructure in the company in which the Heavy Construction and Real Estate segments were brought together in a single business unit called Construction. Engineering and operational Officers functions were also consolidated. The Rental business unit will continues to be operated separately due to its specific characteristics, said the company.

In September the company reduced its workforce, resulting in costs of R$ 3.1 million in the third quarter, however the move will result in annual savings of R$ 10 million in personnel expenses.

In October Mills completed the relocation of its headquarters from Barra da Tijuca to Jacarepaguá, Rio de Janeiro – where the company’s warehouse and operations already take place.

The company’s Rental utilisation rate over the last twelve months was 61.6%, reflecting an improvement in rental volume compared to the previous quarter. This compares to utilisation in Construction of 52.3%, worse than the previous quarter, mainly due to the deterioration of the real estate market, said Mills.

Sales in the quarter totalled R$ 10.2 million, of which R$ 7 million related to semi new equipment. Sales of semi new equipment totalled R$ 1.6 million in Construction and R$ 5.4 million in Rental, part of it coming from equipment exports.

In August, the Rental division closed an equipment sale agreement estimated valued at €8 million. The revenue from the deal will be seen as the equipment is delivered during the fourth quarter of 2015 and first quarter of 2016.

Mills invested R$ 9.5 million in the third quarter, of which R$ 4.2 million was in rental equipment and R$ 1.6 million in equipment licenses.

The company’s total EBITDA margin was 25.7% in the third quarter, compared to 34.8% in the third quarter and 35.3% in the second quarter of 2015. Excluding the layoffs, the move to Camaçari and the allowance for customers debts currently under investigation investigations, EBITDA would have been R$ 38.5 million, with a margin of 28.3%.